Top French hotels facing austerity tax

THWARTED IN its efforts to impose heavy taxes on devotees of Mickey Mouse and Astérix the Gaul, the French government has turned its fire instead on the well-heeled clientele of luxury hotels such as Paris’s Ritz, George V and Bristol.

When François Fillon, the country’s prime minister, unveiled his austerity plan to find €12 billion of yearly savings three weeks ago, he may not have expected that a proposal to almost quadruple value added tax on France’s theme parks would be among his most controversial.

But a lobbying campaign by operators such as Euro Disney, Parc Astérix and Futuroscope, backed by many legislators from President Nicolas Sarkozy’s ruling UMP party, has forced a rapid about-turn.

Park operators complain that the sharp increase in ticket prices would damage tourism hugely at a time when France’s economy is already struggling, while the VAT rise from 5.5 per cent to 19.6 per cent would bring just €90 million to national coffers.

To compensate for the U-turn, Mr Fillon’s ministers are proposing instead to target “luxury” hotels, with all four or five star establishments with nightly rates above €150-€200 expected to have to pay 2 per cent more in taxes.

The episode highlights the challenge faced by Mr Sarkozy in deciding where the axe of austerity should fall.

The proposed compromise, which is being thrashed out with legislators, has predictably raised the hackles of hoteliers.

The decision to switch the tax attack to luxury hotels follows a similar trend in Mr Fillon’s highly political budget, which targeted a series of measures against the rich – with one eye clearly on next year’s presidential elections and Mr Sarkozy’s need to close the poll gap.

But some of those measures aimed at the wealthy are being scaled back after an outcry from UMP party lawmakers. – (Copyright The Financial Times Limited 2011)